United Natural’s 1Q Results Disappoint; MKM Sticks To Buy

United Natural Foods posted lower-than-expected earnings and revenues in the first quarter (ending Oct. 31). Shares of the food wholesaler are up 1% in Thursday’s pre-market session after plunging 14.2% on Wednesday following the earnings results.

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United Natural Foods’ (UNFI) 1Q earnings of $0.51 per share increased marginally from the year-ago quarter’s earnings of $0.47 per share, missing the Street’s estimates of $0.74 per share. The company’s revenues of $6.67 billion rose 6% year-over-year but lagged the consensus estimate of $6.81 billion.

The company said that its revenues “benefited from strong customer demand from existing and new retailers, including the continued benefits of cross selling. The increase in Retail sales included the benefit of an approximately 200% increase in eCommerce sales at Cub Foods.”

As for fiscal 2021, the company re-affirmed its revenue and earnings outlook. United Natural Foods anticipates FY21 EPS in the range of $3.05-$3.55 per share, compared to the Street consensus of $3.34 per share. The company expects FY21 revenues to generate between $27-27.8 billion, compared to analysts’ estimates of $27.26 billion. (See UNFI stock analysis on TipRanks).

Following the financial results, MKM Partners analyst William Kirk maintained a Buy rating and a price target of $26 (61.4% upside potential). The analyst said, “while increased channel demand may be temporary, the cash benefits are permanent. COVID-19 disruption is increasing UNFI cash generation and deleveraging the balance sheet.”

Meanwhile, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 2 Buys and 5 Holds. The average price target stands at $21.60 and implies upside potential of about 34.1% to current levels. Shares have rallied 83.9% year-to-date.